Germany, Europe’s largest economy, is heavily dependent on Russia for gas. German Economy Minister Robert Habeck called on consumers and businesses to cut consumption, telling them “every kilowatt hour counts”. Although supplies were safe at the moment, “we need to increase precautionary measures in order to prepare for an escalation on the part of Russia.” Vladimir Putin said on March 23 that Russia would demand payment in rubles for gas sold to “unfriendly” countries, namely European nations and the United States, which have imposed sanctions on Moscow for its invasion of Ukraine. Putin’s message was: If you want our gas, buy our currency. The Russian president has set March 31 as the deadline for the ruble payments, as Moscow elaborates on practical arrangements. However, European countries, which pay mostly in euros, have so far rejected the demand, with Germany and Poland calling it a breach of contract. The standoff has sparked fears of a gas outage as the deadline approaches. Russia’s shift to ruble payments appears to be largely politically motivated, although it could also help support the Russian currency, which fell to record lows when Western sanctions were imposed. Since then, the ruble has (partially) recovered to trade at 83.73 per dollar this morning, up 2% and to 92.6 per euro, up 1.5%. Kremlin spokesman Dmitry Peshkov told reporters Tuesday: No one will supply gas for free, it is simply impossible and you can only pay for it in rubles. Referring to the new ruble payment mechanism, Peshkov said that “all the details are being developed so that this system is simple, understandable and feasible for respectable European and international buyers.” Today, Russia’s top lawmaker suggested that Russia should switch to payments in rubles for other commodities. “If you want gas, find rubles,” Vyacheslav Volodin, speaker of the lower house of the Russian parliament, said in a Telegram post before proposing that payments in rubles should be extended to oil, grain, metals, fertilizers, coal and timber for rubles in world markets where it is profitable. Asked about this, Peshkov said: This is an idea that should definitely work.
